THE GERMAN ECONOMY (GEC)

PROF. DR. CHRISTOPH KNOPPIK1

APRIL 20212

Course description An applied course on the German economy based on introductory economics. Basic economics as presented in introductory textbooks is briefly reviewed and serves as the basis for analysis. The focus of the course, however, is on policy relevant topics ranging from historic economic events over recent economic reforms to current debates on economic policy. Historic economic episodes and events in Germany like hyperinflation, banking crises, great depression, currency reforms, Wirtschaftswunder, stagflation, German reunification, European monetary integration, and European eastern enlargement continue to inform economists and policy makers and still shape people’s attitudes towards questions of economic policy. Recent (and some not so recent) reforms and policy changes include the introduction of the Euro, the reform of labour market institutions (Hartz I to IV), and many more. Current debates on economic policy and economic policy challenges range from the privatisation and regulation of former state monopolies to the current financial and economic crisis.

1 Prof. Dr. Christoph Knoppik, Institutut für Volkswirtschaftslehre, einschließlich Ökonometrie, Universität Regensburg. Email: [email protected] WWW: https://www.uni-regensburg.de/wirtschaftswissenschaften/vwl-knoppik/ . Tel.: +49 (0) 941 943 2700 2 Version: 13.1.16. Stand/Release: April 2021. GEC.DOCX at C:\LEHRE\GEC\GEC.DOCX . Prof. Dr. Christoph Knoppik The German Economy

Target group The course is primarily targeted at foreign exchange students who want to get acquainted with their host country’s economy and economic policy debate. The course language is English. The course is part of the 2nd phase of the bachelor program in economics. Some prior knowledge in economics is required. Local students from other departments might find the course interesting. Local students of VWL (economics), IVWL (international economics) and BWL (business administration) are also welcome. Notice that local students of BWL must not use the course as their required 2nd phase VWL course.

Stand: April 2019 gec.docx Prof. Dr. Christoph Knoppik The German Economy

Outline3

FRONTMATTER Course description Target group Outline Outline (incl. sections) Outline (incl. subsections)

PART I INTRODUCTION Chapter 1 The German Economy over the Last 100 Years: Events and Time Series Chapter 2 Basic Economics, the Role of the State and the Concept of Soziale Marktwirtschaft

PART II MICROECONOMIC PERSPECTIVES Chapter 3 Competition policy, Privatisation and Regulation Chapter 4 Trade: Made in Germany Chapter 5 Labour Market and Unemployment Chapter 6 Regional and Industry Structure: Agglomeration, Specialisation, Clusters Chapter 7 Environment and Climate

PART III MACROECONOMIC PERSPECTIVES Chapter 8 Growth: The Faded Miracle Chapter 9 Money: From D-Mark to Euro Chapter 10 Government Budget and Debt

PART IV DISTRIBUTIVE JUSTICE Chapter 11 Rich and Poor: The Distribution of Income and Wealth Chapter 12 Demographic Change, Intergenerational Justice and the Pension System

PART V GERMANY AND THE EAST Chapter 13 * German Reunification: Fast Track Transition to a Market Economy and Slow “Aufbau Ost” Chapter 14 Germany’s New Neighbours: New European Union Member States in Central and Eastern Europe

PART VI SELECTED TOPICS Chapter 15 Banking, Financial, Economic and Debt Crisis

PART VII SUMMARY AND OUTLOOK Chapter 16 Summary and Outlook Chapter 17 Outlook

BACKMATTER List of models

3 gec_glu.doc/pdf. Some heading in the outline are marked by * and # symbols: * chapters or sections have not been presented in the lecture. # chapters or section are not relevent for the exam.

Stand: April 2019 gec.docx Prof. Dr. Christoph Knoppik The German Economy

Outline (incl. sections)4

FRONTMATTER Course description Target group Outline Outline (incl. sections) Outline (incl. subsections)

PART I INTRODUCTION Chapter 1 The German Economy over the Last 100 Years: Events and Time Series 1.1 Pathologies 1: Interwar Hyperinflation, Banking Crisis and Depression 1.2 Post World War II Economic Miracle (Wirtschaftswunder) 1.3 Pathologies 2: Stagflation and Euro-Sclerosis 1.4 German Reunification 1.5 Germany in the European Union 1.6 Current Crisis 1.7 [Current Debate] Inflation v Deflation Threats in the Current Crisis Chapter 2 Basic Economics, the Role of the State and the Concept of Soziale Marktwirtschaft 2.1 [Basic Economics] How People Make Decisions (MT principles 1-4) 2.2 [Basic Economics] How People Interact (MT principles 5-7) 2.3 [Basic Economics] How the Economy as a Whole Works (MT principles 8-10) 2.4 [Basic Economics] Basic Economic Models 2.5 Role of the State in the Economy: Market Failure, State Intervention, State Failure 2.6 [Institutional Setup] German Soziale Marktwirtschaft 2.7 [Current Debate] Reinventing the Soziale Marktwirtschaft

PART II MICROECONOMIC PERSPECTIVES Chapter 3 Competition policy, Privatisation and Regulation 3.1 [Basic Facts] Competition Cases by Jurisdiction and Type of Violation 3.2 [Basic Economics] Incomplete Competition 3.3 [Economic Policy] Competition Policies 3.4 [Institutional Setup] Competition Policy in Germany 3.5 [Institutional Setup] Competition policy of the European Union 3.6 [Recent Reform] Regulating Network Industries: The Bundesnetzagentur and Ten Years of Competition in Network Industries 3.7 [Current Debate] Do Old State Monopolies Have to be Privatised? The Case of Deutsche Bahn Chapter 4 Trade: Made in Germany 4.1 [History Lesson] Interwar Protectionism and Post World War II Reintegration of Germany into the World Economy 4.2 [Basic Economics] Gains from Trade and Trade Policy 4.3 [Institutional Setup] Single European Market 4.4 [Basic Facts] Patterns of German International Trade 4.5 [Current Debate] Export Champion or Bazaar Economy Chapter 5 Labour Market and Unemployment 5.1 [Basic Facts] Unemployment in Germany: From Full Employment to High Unemployment in Three Decades 5.2 [Basic Economics] Labour Markets and Unemployment

4 gec_gli.doc/pdf. Some heading in the outline are marked by * and # symbols: * chapters or sections have not been presented in the lecture. # chapters or section are not relevent for the exam.

Stand: April 2019 gec.docx Prof. Dr. Christoph Knoppik The German Economy

5.3 [Institutional Setup] Labour Market Regulation in Germany 5.4 [Recent Reform] Hartz Labour Market Reforms: Unemployment Benefits 5.5 [Recent Developments] Labor Market Response to Current Crisis 5.6 [Current Debate] A Legal Minimum Wage for Germany? Chapter 6 Regional and Industry Structure: Agglomeration, Specialisation, Clusters 6.1 [Basic Facts] Industrial and Spatial Structure of Economic Activity in Germany 6.2 [Basic Economics] New Economic Geography: Distance, Increasing Returns and Incomplete Competition 6.3 [Basic Economics] Clusters: Strategic Cooperation, Tacit Knowledge and Innovation 6.4 [Economic Policy] Cluster Based Regional and Industrial Policies 6.5 [Current Debate] State Support for Clusters Chapter 7 Environment and Climate 7.1 [Basic Facts] 7.2 [Basic Economics] Externalities in the Basic Market Model 7.3 [Economic Policy] Approaches 7.4 [Recent Reform] Öko-Steuer, Emission Trading and More 7.5 [Current Debate] Energiewende 7.6 Electricity

PART III MACROECONOMIC PERSPECTIVES Chapter 8 Growth: The Faded Miracle 8.1 [Basic Facts] Growth in Germany 8.2 [Basic Economics] Growth Theory 8.3 [Basic Economics] Growth Policies 8.4 [Economic Policy] Lisbon Strategy 8.5 [Current Debate] Growth Strategies – A Success in Germany? Chapter 9 Money: From D-Mark to Euro 9.1 [History Lesson] Attitudes towards Inflation 9.2 [Basic Economics] Money, Prices, and Inflation 9.3 [Economic Policy] Mandates for Central Banks 9.4 [Economic Policy] Monetary Union 9.5 [Institutional Setup] Deutsche Bundesbank and European Central Bank in the European System of Central Banks (ESCB) and the Eurosystem 9.6 [Current Debate] Euro Zone: Growing or Breaking Up? Chapter 10 Government Budget and Debt 10.1 [Basic Facts] Government Finances 10.2 [Recent Reform] German Income Tax Reforms 10.3 [Basic Economics] Deficit-Debt-Dynamics 10.4 [Institutional Setup] European Stability and Growth Pact (SGP) 10.5 [Institutional Setup] German Schuldenbremse: New national fiscal rule 10.6 [Current Debate] Budget Consolidation Plans in Summer 2010

PART IV DISTRIBUTIVE JUSTICE Chapter 11 Rich and Poor: The Distribution of Income and Wealth 11.1 [Basic Facts] Measuring Inequality 11.2 [Basic Economics] Labour Market Inequality 11.3 [Economic Policy] Reducing Inequality and Poverty 11.4 [Current Debate] Unconditional Basic Income (Grundeinkommen) Chapter 12 Demographic Change, Intergenerational Justice and the Pension System 12.1 [Basic Facts] Population 12.2 Demographic Change 12.3 Families 12.4 Migration

PART V GERMANY AND THE EAST Chapter 13 * German Reunification: Fast Track Transition to a Market Economy and Slow “Aufbau Ost”

Stand: April 2019 gec.docx Prof. Dr. Christoph Knoppik The German Economy

Chapter 14 Germany’s New Neighbours: New European Union Member States in Central and Eastern Europe 14.1 [Basic Facts] Trade 14.2 [Basic Facts] Foreign Direct Investment 14.3 [Basic Facts] Migration 14.4 Effects on Germany 14.5 [Current Debate] Recent and Future Enlargements of the European Union

PART VI SELECTED TOPICS Chapter 15 Banking, Financial, Economic and Debt Crisis 15.1 [History Lesson] German and International Experience with Banking Crises 15.2 [Basic Economics] Bank Failures, Bank Runs and Banking Crises 15.3 [Economic Policy] Preventing Instability of the banking sector 15.4 *[Institutional Setup] Basel Agreements 15.5 *[Institutional Setup] The German Banking System and the Bundesanstalt für Finanzaufsicht (BaFin) 15.6 Current Banking Crisis: From US to Germany 15.7 Current Financial Crisis 15.8 Current Economic Crisis: The Downturn of the Real Economy 15.9 [Economic Policy] Bank Rescue Packages 15.10 [Economic Policy] Stimulus Packages

PART VII SUMMARY AND OUTLOOK Chapter 16 Summary and Outlook Chapter 17 Outlook

BACKMATTER List of models

Stand: April 2019 gec.docx